4.1 Leases/agreements. The management company shall ensure that a written agreement is in place for every tenant/resident occupying the property that specifically addresses the responsibilities of both the landlord and tenant.
Explanation of best practice 4.1. In rental properties, a lease, a legal contract between the two parties, defines the rights and responsibilities of the tenant and the landlord, defined as the owner or the owner’s designated agent. As such, it protects the tenant’s interests as much as it protects the property owner’s interests. It is based on the intended use of the space, the common areas, and any special provisions for that usage for the tenant and regular payments in the form of rent for the owner. It is management’s responsibility to administer lease agreements and ensure that both parties act consistently with the terms of the lease, which requires the management company to have on file and regularly review a written lease for each tenant or sub-tenant.
4.2 Tenant/resident insurance requirements. If required by the client, leases shall specify the responsibilities of the tenant with respect to insurance, including any minimum coverages required, and the management company shall develop and implement a system for the collection and regular compliance review of tenants’ certificates of insurance.
Explanation of best practice 4.2. Because insurance for the property as a whole does not cover the contents of tenants’ individually leased spaces, tenants are responsible for carrying insurance for these contents. In the case of residential leases, tenant insurance policies are readily available. For commercial property, most leases require tenants to carry enough insurance to cover their inventory and whatever furnishings and equipment they have in their leased space. The commercial tenant’s insurance coverage should be sufficient both to preserve the business and to meet the terms of the lease in case of disaster. Commercial tenants are usually required to carry their own liability insurance, and the lease should obligate them to list the owner of the property and management company as additional named insureds on insurance policies. On the residential side, mandatory renters insurance not only affords coverage to tenants, it protects owners from tenant/resident-caused losses and claims (fires, floods, animal bites) and, in the event of a loss, may save the owner from making a claim and paying a deductible.
4.3 Tenant/resident safety. The management company shall develop, maintain, and enforce, subject to individual leases between parties and applicable laws and regulations, general safety guidelines and awareness to protect tenants/residents and others lawfully on the common areas of the property.
Explanation of best practice 4.3. Safety and crime prevention play important roles in managing all aspects of operating a property and running a property management company. The management company should assess the safety and crime prevention needs of the property and develop, monitor, and implement a safety plan that is communicated to tenants and others on the property. Depending on property type and complexity of operations, included in this assessment should be an accident prevention plan.
To develop a safety and crime prevention plan that meets the needs of the property and minimizes liabilities, it is recommended that the management company consult with law enforcement, local neighborhood watch groups, and/or a third-party professional security firm.
4.4 Tenant/resident and occupant customer service. The management company shall have a customer service plan for tenants, residents, and others lawfully on the premises.
Explanation of best practice 4.4. A property’s most valuable asset is its income stream, and this income stream comes primarily from the rents paid by tenants. Keeping tenants is easier and less expensive than replacing tenants. A tenant and occupant customer service plan will vary among property types but generally will include building operations and practices; frequent communications; accurate and timely tenant billings; timely return of phone calls and emails; requests handled in a timely and courteous fashion; and personal visits on a regular basis – and employee training to support all of these protocols. Providing a high level of customer service to tenants will improve relations, impact turnover, and enhance the ability to attain the client’s goals and objectives.
4.5 Tenant/resident selection. The management company shall develop and adhere to written policies and procedures on tenant selection that are consistent with client directives, company policy, and in compliance with applicable laws and regulations.
Explanation of best practice 4.5. Selection of tenants for a property requires consistently applied policies and procedures and constant awareness of laws and regulations that differ among property types. Irrespective of the property type, by renting to the best qualified applicants at the beginning, many management problems can be avoided. Once a prospect has filled out an application, feasibility as a tenant must be assessed by qualifying the potential tenant. Qualifying a residential prospect can involve examining household income, references, credit history, and court records for evictions and landlord/tenant civil actions; conducting criminal background checks; and taking other qualification steps in accordance with applicable laws and regulations. Qualifying a commercial prospect consists of evaluating the business in a number of areas, such as financial strength, stability, reputation, and business operations. The management company’s responsibility to the client in tenant selection is to maximize net operating income and minimize risk.
4.6 Lease compliance. The management company shall monitor that tenants are in compliance with lease terms, including but not limited to rent collections, and act accordingly in the event of noncompliance.
Explanation of best practice 4.6. The management company is responsible for ensuring the tenants are in compliance with lease terms and, if not, acting accordingly. When dealing with any type of lease violation, the management company should always operate within the controlling laws and regulations governing delinquency, collection, and eviction rights and procedures. The management company must be familiar with and understand both the laws and regulations and the practices that govern these matters. Failure to ensure that prospective tenants will adhere to the lease terms will defeat the client’s objectives.
4.7 Privacy. The management company shall respect a tenant’s privacy and not divulge sensitive or protected information that could violate a person’s privacy, subject to applicable laws and regulations.
Explanation of best practice 4.7. The property and its operations require the collection and retention of sensitive information on tenants and they have a rightful expectation that this information will be kept private. Failure to protect confidential information may also be a violation of applicable laws or regulations. The management company shall establish how information will be kept secure and under what circumstances it will be shared.